<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1995
-------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________________ to _________________
Commission file number 0-12379
-------
FIRST FINANCIAL BANCORP.
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1042001
---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 High Street, Hamilton, Ohio 45011
---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 867-4700
-----------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- --------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 1, 1995
----------------------------- ------------------------------
Common stock, $8.00 par value 12,211,490
<PAGE> 2
FIRST FINANCIAL BANCORP.
INDEX
Page No.
<TABLE>
<S> <C>
PART I-FINANCIAL INFORMATION
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 1
Consolidated Statements of Earnings -
Three Months Ended
March 31, 1995 and 1994 2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II-OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURE 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 92,734 $ 103,752
Interest-bearing deposits with other banks 4,517 8,055
Federal funds sold and securities purchased
under agreements to resell 198 97
Investment securities held-to-maturity
(market value - $126,377 at March 31, 1995 and
$140,319 at December 31, 1994) 120,765 135,187
Investment securities available-for-sale,
at market value 211,556 242,410
Loans
Commercial 311,415 286,635
Real estate-construction 24,292 29,273
Real estate-mortgage 747,261 746,150
Installment 297,747 285,412
Credit card 13,850 15,599
Lease financing 15,897 16,102
----------- -----------
Total loans 1,410,462 1,379,171
Less
Unearned income 312 304
Allowance for loan losses 18,904 18,609
----------- -----------
Net loans 1,391,246 1,360,258
Premises and equipment 37,750 37,999
Deferred income taxes 4,583 5,904
Accrued interest and other assets 29,992 28,981
----------- -----------
TOTAL ASSETS $1,893,341 $1,922,643
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing $ 184,417 $ 201,331
Interest-bearing 1,406,278 1,385,993
----------- -----------
Total deposits 1,590,695 1,587,324
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase 74,336 81,609
Other 6,066 41,510
----------- -----------
Total short-term borrowings 80,402 123,119
Accrued interest and other liabilities 20,992 17,527
----------- -----------
TOTAL LIABILITIES 1,692,089 1,727,970
SHAREHOLDERS' EQUITY
Common stock - par value, $8 per share
Authorized - 25,000,000 shares
Issued - 12,209,474 in 1995, 12,204,575 in 1994 97,676 97,637
Surplus 15,074 15,027
Retained earnings 88,944 84,748
Unrealized net losses on securities available-for-sale (384) (2,712)
Restricted stock awards (58) (27)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 201,252 194,673
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,893,341 $ 1,922,643
=========== ===========
See notes to consolidated financial statements.
</TABLE>
1
<PAGE> 4
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 29,988 $ 24,291
Investment securities
Taxable 3,998 4,632
Tax-exempt 2,083 2,548
--------- ---------
Total investment interest 6,081 7,180
Interest-bearing deposits with other banks 75 126
Federal funds sold and securities
purchased under agreements to resell 18 138
--------- ---------
TOTAL INTEREST INCOME 36,162 31,735
INTEREST EXPENSE
Deposits 13,035 11,412
Short-term borrowings 1,460 188
Long-term borrowings 0 53
--------- ---------
TOTAL INTEREST EXPENSE 14,495 11,653
--------- ---------
NET INTEREST INCOME 21,667 20,082
Provision for loan losses 393 169
--------- ---------
Net interest income after
provision for loan losses 21,274 19,913
NONINTEREST INCOME
Service charges on deposit accounts 2,022 1,978
Trust income 1,894 1,797
Investment securities gains 13 6
Other 944 1,323
--------- ---------
TOTAL NONINTEREST INCOME 4,873 5,104
NONINTEREST EXPENSES
Salaries and employee benefits 8,076 7,808
Net occupancy expenses 1,081 1,096
Furniture and equipment expenses 806 764
Data processing expenses 1,317 1,284
Deposit insurance expense 886 883
State taxes 400 477
Other 3,095 3,077
--------- ---------
TOTAL NONINTEREST EXPENSES 15,661 15,389
--------- ---------
Income before income taxes 10,486 9,628
Income tax expense 3,117 2,626
--------- ---------
NET EARNINGS $ 7,369 $ 7,002
========= =========
Net earnings per common share $ 0.60 $ 0.57
========= =========
Cash dividends declared per share $ 0.26 $ 0.22
========= =========
Average shares outstanding 12,206,529 12,210,706
========== ==========
See notes to consolidated financial statements.
</TABLE>
2
<PAGE> 5
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1995 1994
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 7,369 $ 7,002
Adjustments to reconcile net earnings to net cash
provided by operating activities
Provision for loan losses 393 169
Provision for depreciation and amortization 921 868
Net amortization of investment security
premiums and accretion of discounts 400 523
Deferred income taxes 0 953
Realized investment security gains (13) (6)
Originations of mortgage loans held for sale (1,760) (24,208)
Gains from sales of mortgage loans held for sale (24) (278)
Proceeds from sale of mortgage loans held for sale 1,784 24,486
Decrease (increase) in interest receivable 771 (1,100)
Increase in prepaid expenses (1,785) (1,757)
Increase in accrued expenses 2,680 936
Increase (decrease) in interest payable 1,187 (256)
Other (1,008) (1,052)
---------- ----------
Net cash provided by operating activities 10,915 6,280
INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale 18,224 2,003
Proceeds from calls, paydowns and maturities of
securities available-for-sale 23,227 20,839
Purchases of securities available-for-sale (7,280) (33,999)
Proceeds from calls, paydowns and maturities of
securities held-to-maturity 14,375 10,035
Purchases of securities held-to-maturity (15) (5,249)
Net decrease in interest-bearing deposits
with other banks 3,538 8,367
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell (101) 11,509
Net increase in loans and leases (31,744) (15,012)
Recoveries from loans and leases previously charged off 269 242
Proceeds from disposal of other real estate owned 541 378
Purchases of premises and equipment (500) (1,000)
---------- ----------
Net cash provided by (used in) investing activities 20,534 (1,887)
FINANCING ACTIVITIES
Net increase in total deposits 3,371 1,603
Net decrease in short-term borrowings (42,717) (464)
Principal payments of long-term borrowings 0 (1,857)
Cash dividends declared (3,174) (2,627)
Exercise of stock options 53 145
---------- ----------
Net cash used in financing activities (42,467) (3,200)
---------- ----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,018) 1,193
Cash and cash equivalents at beginning of period 103,752 88,926
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 92,734 $ 90,119
========== ==========
</TABLE>
3
<PAGE> 6
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Supplemental disclosures
Interest paid $ 13,308 $ 11,909
========== ==========
Income taxes paid $ 85 $ 161
========== ==========
Recognition of deferred tax assets (liabilities)
attributable to FASB Statement No. 115 $ 1,321 $ (941)
========== ==========
Acquisition of other real estate owned through
foreclosure $ 101 $ 75
========== ==========
Issuance of restricted stock awards $ 33
==========
Transfer of securities to available-for-sale upon
adoption of FASB Statement No. 115 $272,856
==========
See notes to consolidated financial statements.
</TABLE>
4
<PAGE> 7
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consolidated financial statements for interim periods are unaudited;
however, in the opinion of the management of First Financial Bancorp.
("Bancorp"), all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation have been included.
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements of Bancorp, a bank and savings and loan
holding company, include the accounts of Bancorp and its wholly-owned
subsidiaries - First National Bank of Southwestern Ohio, Citizens Commercial
Bank & Trust Company, Van Wert National Bank, Union Trust Bank, Indiana
Lawrence Bank, Fidelity Federal Savings Bank, Citizens First State Bank,
Fayette Federal Savings Bank, Home Federal Bank - A Federal Savings Bank,
Union Bank & Trust Company, and The Clyde Savings Bank Company. All
significant intercompany transactions and accounts have been eliminated in
consolidation. Intangible assets arising from the acquisition of subsidiaries
are being amortized over varying periods, none of which currently exceeds 15
years. Core deposit balances are being amortized over varying periods, none of
which currently exceeds 10 years.
The accompanying financial statements have been prepared in accordance with the
instructions for Form 10-Q and therefore, do not include all information and
footnotes necessary to be in conformity with generally accepted accounting
principles.
The Consolidated Statements of Cash Flows has been presented utilizing the
indirect method. For purposes of the Consolidated Statements of Cash Flows,
Bancorp considers cash and due from banks as cash and cash equivalents.
The assumed exercise of stock options would not have a materially dilutive
effect, therefore, fully diluted earnings per share is not presented.
NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, Bancorp offers a variety of financial
instruments with off-balance-sheet risk to its customers to aid them in meeting
their requirements for liquidity and credit enhancement and to reduce its own
exposure to fluctuations in interest rates. These financial instruments
include standby letters of credit and commitments outstanding to extend credit.
Generally accepted accounting principles do not require these financial
instruments to be recorded in the consolidated financial statements, and
accordingly, they are not. Bancorp does not use off-balance-sheet derivative
financial instruments (such as interest rate swaps) as defined in the Financial
Accounting Standards Board's (FASB) Statement No. 119 "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments".
Bancorp's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for standby letters of credit and commitments
outstanding to extend credit is represented by the contractual amounts of those
instruments. Bancorp uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments. Following
is a discussion of these transactions.
5
<PAGE> 8
Standby letters of credit are conditional commitments issued by Bancorp to
guarantee the performance of a customer to a third party. Bancorp's portfolio
of standby letters of credit consists primarily of performance assurances made
on behalf of customers who have a contractual commitment to produce or deliver
goods or services. The risk to Bancorp arises from its obligation to make
payment in the event of the customers' contractual default. As of March 31,
1995, Bancorp had issued standby letters of credit aggregating $10,573,000
compared to $9,976,000 issued as of December 31, 1994. Management conducts
regular reviews of these instruments on an individual customer basis, and the
results are considered in assessing the adequacy of Bancorp's allowance for
loan losses. Management does not anticipate any material losses as a result of
these letters of credit.
Loan commitments are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Bancorp evaluates each customer's creditworthiness
on an individual basis. The amount of collateral obtained, if deemed necessary
by Bancorp upon extension of credit, is based on management's credit evaluation
of the counterparty. The collateral held varies, but may include securities,
real estate, inventory, plant, or equipment. Bancorp had commitments
outstanding to extend credit totaling $202,299,000 at March 31, 1995 and
$216,802,000 at December 31, 1994. Management does not anticipate any material
losses as a result of these commitments.
NOTE 3: PENDING MERGERS
On December 29, 1994, Bancorp signed a Definitive Agreement of Merger with
Peoples Bank and Trust Company, Sunman, Indiana. Subject to required
shareholder and regulatory approvals, the merger of this $52 million bank is
expected to be consummated during the third quarter of 1995 and be accounted
for using the pooling-of-interests method of accounting.
On February 20, 1995, Bancorp signed a Definitive Agreement of Merger with
Bright Financial Services, Inc., Flora, Indiana. Bright Financial Services,
Inc. is a one-bank holding company whose only subsidiary is the $110 million
Bright National Bank. Subject to required shareholder and regulatory
approvals, this merger is also expected to be consummated during the third
quarter of 1995 and be accounted for using the pooling-of-interests method of
accounting.
NOTE 4: ACCOUNTING CHANGES
Bancorp adopted FASB Statement No. 114 "Accounting by Creditors for Impairment
of a Loan", as amended by FASB Statement No. 118 "Accounting by Creditors for
Impairment of a Loan -Income Recognition and Disclosures" effective January 1,
1995. The adoption of the standard did not have a material impact on Bancorp's
financial position or results of operations. For additional disclosures refer
to the MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ALLOWANCE FOR LOAN LOSSES and NONPERFORMING/UNDERPERFORMING
ASSETS sections.
6
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994
---------- --------------------------------------------------
Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net Earnings $ 7,369 $ 6,516 $ 7,161 $ 7,494 $ 7,002
Average Consolidated Balance Sheet Items:
Loans less unearned income 1,394,024 1,345,953 1,291,400 1,232,887 1,188,826
Investment securities (including
available-for-sale) 347,172 393,912 421,654 437,978 440,824
Other earning assets 7,056 5,696 9,761 16,616 30,909
---------- ---------- ---------- ---------- ----------
Total Earning Assets 1,748,252 1,745,561 1,722,815 1,687,481 1,660,559
Total assets 1,871,532 1,878,577 1,851,992 1,817,432 1,786,797
Deposits 1,551,899 1,576,111 1,567,006 1,566,535 1,554,221
Shareholders' equity 197,050 192,414 191,555 187,922 182,983
Key Ratios:
Average equity to average total assets 10.53% 10.24% 10.34% 10.34% 10.24%
Return on average total assets 1.57% 1.39% 1.55% 1.65% 1.57%
Return on average equity 14.96% 13.55% 14.95% 15.95% 15.31%
Net interest margin (fully tax equivalent) 5.23% 5.30% 5.24% 5.26% 5.18%
</TABLE>
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the amount by which
interest and fees generated by earning assets exceed the interest costs of
liabilities obtained to fund them. For analytical purposes, interest income
presented in the table below has been adjusted to a tax equivalent basis
assuming a 35% marginal tax rate for interest earned on tax-exempt assets such
as municipal loans, tax-free leases and investments. This is to recognize the
income tax savings which facilitates a comparison between taxable and
tax-exempt assets. As shown below, net interest income on a fully tax
equivalent basis has increased $1,347,000 over the first quarter of 1994.
However, net interest income declined slightly from the fourth quarter of 1994.
The rise in interest rates during the fourth quarter of 1994 significantly
impacted competitive pressures to raise core deposit rates during the first
quarter of 1995. It is anticipated that it will be difficult to maintain the
same high level of net interest margin realized in 1994 during 1995. The tax
equivalent adjustment to interest income has gradually declined over the
periods presented as a result of a decline in tax-exempt assets.
<TABLE>
<CAPTION>
QUARTER ENDED
1995 1994
-------- --------------------------------------------------
Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
-------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest income $36,162 $35,317 $33,913 $32,539 $31,735
Interest expense 14,495 13,487 12,685 11,762 11,653
------- ------- ------- ------- -------
Net interest income 21,667 21,830 21,228 20,777 20,082
Tax equivalent adjustment to interest income 1,191 1,308 1,336 1,409 1,429
------- ------- ------- ------- -------
Net interest income (fully tax equivalent) $22,858 $23,138 $22,564 $22,186 $21,511
======= ======= ======= ======= =======
</TABLE>
RATE/VOLUME ANALYSIS
The change in interest due to the combined effect of both rate and volume has
been allocated to the volume and rate variance on a prorated basis. The impact
of changes in volume and interest rates on net interest income is illustrated
on the following page.
7
<PAGE> 10
The increase in volume of earning assets outweighed the increase in
interest-bearing liabilities, resulting in an increase to net interest income
of $1,197,000 for the three months ended March 31, 1995 in comparison to the
same period in 1994. The increase in rate for earning assets had a favorable
effect on interest income and the increase in rate for interest-bearing
liabilities had an unfavorable effect on interest expense. However, the effect
on earning assets was greater resulting in an increase in net interest income
of $388,000 year-to-date 1995 in comparison to the same period in 1994. The
combined effect of rate and volume on earning assets caused interest income to
increase by $4,427,000 year-to-date March 31, 1995 versus 1994. The combined
effect on interest-bearing liabilities caused 1995's interest expense to
increase by $2,842,000 year-to-date versus 1994, thus, providing the $1,585,000
increase in net interest income for the three months of 1995 over that reported
for the same period in 1994.
<TABLE>
<CAPTION>
Three Months
Ended Change Due To:
Mar. 31, 1995 -----------------------
Over 1994 Rate Volume
-------------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Interest income $ 4,427 $ 2,697 $ 1,730
Interest expense 2,842 2,309 533
-------- -------- --------
Net interest income $ 1,585 $ 388 $ 1,197
======== ======== ========
</TABLE>
OPERATING RESULTS
Net operating income represents net earnings before net securities
transactions. Net operating income for the first three months of 1995 was
$7,337,000 which was an increase of $339,000 or 4.84% over that reported in the
same period in 1994. This increase in net operating income can be primarily
attributed to an increase in net interest income of $1,585,000 or 7.89%. The
positive variance in net interest income was offset by increases in provision
for loan losses, noninterest expense and income tax expense. The increase in
income tax expense is discussed in the next section. Noninterest income for
the first three months of 1995 decreased 4.53% in comparison to the same period
in 1994 due to nonrecurring items in 1994. The majority of the nonrecurring
items realized in 1994 were attributable to gains on the sale of loans.
INCOME TAXES
For the first three months of 1995, income tax expense was $3,117,000 compared
to $2,626,000 for the same period in 1994, or an increase of $491,000. In
1995, $3,136,000 of the tax expense was related to operating income with a tax
benefit of $19,000 related to securities transactions. In the first three
months of 1994, income tax expense related to operating income was $2,624,000
with a tax expense related to securities transactions of $2,000. The
significant increase in taxes on operating income was due to the increase in
operating income before taxes and securities transactions of $851,000 or 8.84%
over that reported for the first three months of 1994 and a higher effective
tax rate for the period in 1995. The higher effective tax rate was somewhat
attributable to the effect of calls and decreased income from tax-exempt
securities.
NET EARNINGS
Net earnings for the first three months of 1995 were $367,000 or 5.24% more
than that recorded during the same period in 1994. As was discussed
previously, net operating income was $7,337,000 which was 4.84% greater than
the same period in 1994. Net securities gains through March 31, 1995 were
$32,000 compared to $4,000 for the same period in 1994.
8
<PAGE> 11
ALLOWANCE FOR LOAN LOSSES
Beginning in 1995, Bancorp adopted FASB Statement No. 114. Under the new
standard, the 1995 allowance for loan losses related to loans that are
identified for evaluation in accordance with FASB Statement No. 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. Prior to
1995, the allowance for loan losses related to these loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated probable credit losses. Management's periodic
evaluation of the adequacy of the allowance is based on Bancorp's past loan
loss experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
At March 31, 1995, the recorded investment in loans that are considered to be
impaired under FASB Statement No. 114 was $1,142,000, all of which were on a
nonaccrual basis. The related allowance for loan losses on these impaired
loans was $423,000. There were no impaired loans that as a result of
write-downs did not have an allowance for loan losses. The average recorded
investment in impaired loans for the quarter ended March 31, 1995, was
approximately $1,148,000. For the quarter ended March 31, 1995, Bancorp
recognized interest income on those impaired loans of $27,000. Bancorp
recognizes income on impaired loans using the cash basis method. The table
below indicates the activity in the allowance for loan losses for the quarters
presented.
<TABLE>
<CAPTION>
Quarter Ended
1995 1994
-------- --------------------------------------
Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $18,609 $18,441 $18,504 $18,367 $18,380
Provision for loan losses 393 611 298 190 169
Loans charged off (367) (713) (643) (372) (424)
Recoveries 269 270 282 319 242
-------- -------- -------- -------- --------
Net charge offs (98) (443) (361) (53) (182)
-------- -------- -------- -------- --------
Balance at end of period $18,904 $18,609 $18,441 $18,504 $18,367
======== ======== ======== ======== ========
Ratios:
Allowance to period end loans,
net of unearned income 1.34% 1.35% 1.40% 1.46% 1.53%
Recoveries to charge offs 73.30% 37.87% 43.86% 85.75% 57.08%
Allowance as a multiple of
net charge offs 192.90X 42.01X 51.08X 349.13X 100.92X
</TABLE>
NONPERFORMING/UNDERPERFORMING ASSETS
The table on the following page shows the categories which are included in
nonperforming and underperforming assets.
Nonperforming assets decreased $1,375,000 or 17.9% in the first quarter of 1995
when compared to the first quarter of 1994. In that same period, accruing
loans past due 90 days or more decreased $399,000. Accruing loans, including
loans impaired under FASB Statement No. 114, which are past due 90 days or more
where there is not a likelihood of becoming current are transferred to
nonaccrual loans. However, those loans, which management feels will become
current and, therefore accruing, will be classified as "Accruing loans 90 days
or more past due" until they become current.
9
<PAGE> 12
<TABLE>
<CAPTION>
Quarter Ended
1995 1994
-------- --------------------------------------
Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 3,457 $ 2,412 $ 2,938 $ 3,288 $ 3,952
Restructured loans 1,173 1,429 1,245 1,259 373
OREO/ISF* 1,669 2,116 2,164 2,953 3,349
-------- -------- -------- -------- --------
Total nonperforming assets 6,299 5,957 6,347 7,500 7,674
Accruing loans past due
90 days or more 700 683 944 877 1,099
-------- -------- -------- -------- --------
Total underperforming assets $ 6,999 $ 6,640 $ 7,291 $ 8,377 $ 8,773
======== ======== ======== ======== ========
Nonperforming assets as a percent
of loans, net of unearned income
plus OREO/ISF 0.45% 0.43% 0.48% 0.59% 0.64%
======== ======== ======== ======== ========
Underperforming assets as a percent
of loans, net of unearned income
plus OREO/ISF 0.50% 0.48% 0.55% 0.66% 0.73%
======== ======== ======== ======== ========
*Other real estate owned/In-substance foreclosure
</TABLE>
In accordance with FASB Statement No. 114, a loan is classified as in-substance
foreclosure when Bancorp has taken possession of the collateral regardless of
whether formal foreclosure proceedings take place. Loans previously classified
as in-substance foreclosure but for which Bancorp had not taken possession of
the collateral have not been reclassified to loans due to immateriality. At
December 31, 1994, loans classified as in-substance foreclosure were $70,000.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management is the process by which Bancorp provides for the
continuing flow of funds necessary to meet its financial commitments on a
timely basis. These commitments include withdrawals by depositors, funding
credit commitments to borrowers, shareholder dividends, paying expenses of
operations, and funding capital expenditures.
Liquidity is derived primarily from deposit growth, maturing loans, the
maturity of investment securities, access to other funding sources and markets,
and a strong capital position. The most stable source of liability-funded
liquidity for both the long-term and short-term is deposit growth and retention
in the core deposit base. At the end of the first quarter of 1995 Bancorp's
deposit liabilities had increased by 0.21% from December 31, 1994. Another
source of funding is through short-term borrowings. Bancorp's short-term
borrowings decreased to $80,402,000 at March 31, 1995, compared to $123,119,000
at December 31, 1994. This higher short-term funding was required at December
31, 1994 in anticipation of maturing investment securities.
The principal source of asset-funded liquidity is marketable investment
securities, particularly those of shorter maturities. At March 31, 1995,
securities maturing in one year or less amounted to $94,169,000, representing
28.3% of the total of the investment securities portfolio. In addition, other
types of assets such as cash and due from banks, federal funds sold and
securities purchased under agreements to resell, as well as loans and
interest-bearing deposits with other banks maturing within one year, are
sources of liquidity. Total asset-funded sources of liquidity at March 31,
1995, amounted to $447,749,000, representing 23.6% of total assets. Sources of
long-term asset funded liquidity are derived from the maturity of investment
securities and maturing loans in excess of one year.
At March 31, 1995, Bancorp had classified $211,556,000 in investment securities
available-for-sale. Management examines Bancorp's liquidity needs in
establishing this classification in accordance with the Financial Accounting
Standards Board Statement No. 115 on accounting for certain investments in debt
and equity securities.
10
<PAGE> 13
Liquidity is very important and as such is both monitored and managed closely
by the asset/liability committee at each affiliate. Liquidity may be used to
fund capital expenditures. Capital expenditures were $500,000 for the first
three months of 1995. In addition, remodeling is a planned and ongoing process
given the 69 offices of Bancorp and its subsidiaries. Material commitments for
capital expenditures as of March 31, 1995 were approximately $1,256,000. A
significant portion of these commitments are associated with plans for an
additional branch office at First National Bank of Southwestern Ohio.
Management believes that Bancorp has sufficient liquidity to fund its current
commitments.
CAPITAL ADEQUACY
The Federal Reserve established risk-based capital requirements for U.S.
banking organizations which have been adopted by the Office of Thrift
Supervision for savings and loan associations. Risk weights are assigned to
on-and off-balance sheet items in arriving at risk-adjusted total assets.
Regulatory capital is divided by risk-adjusted total assets, with the resulting
ratio compared to a minimum standard to determine whether a bank has adequate
capital.
Fully phased-in guidelines require 4.00% for Tier 1 capital, which consists
mainly of common shareholders' equity net of intangibles, and 8.00% for total
capital (Tier 1 plus Tier 2 supplementary capital).
Bancorp's Tier 1 ratio at March 31, 1995, was 14.3% and its total capital ratio
was 15.5%. While Bancorp's ratios are well above the guidelines, management
will continue to monitor the asset mix, product pricing, and the allowance for
loan losses, which are the areas determined to be most affected by these
requirements. The following table illustrates the risk-based capital
calculations and ratios for the past five quarters.
<TABLE>
<CAPTION>
Quarter Ended
1995 1994
---------- ------------------------------------------------
Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tier I Capital:
Shareholder's equity $ 201,252 $ 194,673 $ 194,033 $ 190,060 $ 187,396
Less: Intangible assets 4,056 4,230 4,446 4,625 4,805
Less: Unrealized net securities
(losses)/gains (384) (2,712) (934) (571) 1,565
---------- ---------- ---------- ---------- ----------
Total Tier I Capital $ 197,580 $ 193,155 $ 190,521 $ 186,006 $ 181,026
========== ========== ========== ========== ==========
Total Risk-Based Capital:
Tier I Capital $ 197,580 $ 193,155 $ 190,521 $ 186,006 $ 181,026
Qualifying Allowance for Loan Losses 16,705 17,074 16,803 16,047 15,434
---------- ---------- ---------- ---------- ----------
Total Risk-Based Capital $ 214,285 $ 210,229 $ 207,324 $ 202,053 $ 196,460
========== ========== ========== ========== ==========
Risk Weighted Assets $1,383,180 $1,365,882 $1,344,203 $1,283,793 $1,234,680
========== ========== ========== ========== ==========
Risk-Based Ratios:
Tier I 14.28% 14.14% 14.17% 14.49% 14.66%
========== ========== ========== ========== ==========
Total Risk-Based Capital 15.53% 15.39% 15.42% 15.74% 15.91%
========== ========== ========== ========== ==========
</TABLE>
11
<PAGE> 14
ACCOUNTING AND REGULATORY MATTERS
Management is not aware of any other events or regulatory recommendations
which, if implemented, are likely to have a material effect on Bancorp's
liquidity, capital resources, or operations.
PART II-OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On April 25, 1995, Bancorp held its annual meeting of shareholders,
the results of which follow:
1) Election of five directors:
<TABLE>
<S> <C> <C> <C> <C> <C>
Abstentions/
% of Total Votes Broker Non-
Name Term Votes For Shares Voted Against Votes
---- ---- --------- ------------ ------- -----------
Thomas C. Blake 3 years 10,769,045 99.84% 16,473 1,423,057
F. Elden Houts 3 years 10,770,197 99.86% 15,321 1,423,057
Charles T. Koehler 3 years 10,768,777 99.84% 16,741 1,423,057
Lauren N. Patch 3 years 10,767,883 99.83% 17,635 1,423,057
Paul G. Risser 3 years 10,744,014 99.61% 41,504 1,423,057
</TABLE>
Directors whose terms continue beyond the Annual Meeting in 1995:
Class I Term expiring in 1996:
Arthur W. Bidwell
Carl R. Fiora
Vaden Fitton
Barry J. Levey
Joseph L. Marcum
Class II Term expiring in 1997:
Richard J. Fitton
Murph Knapke
Stanley N. Pontius
Barry S. Porter
Joel H. Schmidt
No other matters were brought before the meeting for a vote.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) Reports on Form 8-K
During the quarter ended March 31, 1995, the registrant did not
file any reports on Form 8-K.
12
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST FINANCIAL BANCORP.
-------------------------
(Registrant)
Date May 3, 1995 /s/ Michael R. O'Dell
---------------------- -------------------------
Michael R. O'Dell,
Comptroller
13
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000708955
<NAME> FIRST FINANCIAL BANCORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 92,734
<INT-BEARING-DEPOSITS> 4,517
<FED-FUNDS-SOLD> 198
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 211,556
<INVESTMENTS-CARRYING> 120,765
<INVESTMENTS-MARKET> 126,377
<LOANS> 1,410,150
<ALLOWANCE> 18,904
<TOTAL-ASSETS> 1,893,341
<DEPOSITS> 1,590,695
<SHORT-TERM> 80,402
<LIABILITIES-OTHER> 20,992
<LONG-TERM> 0
<COMMON> 97,676
0
0
<OTHER-SE> 103,576
<TOTAL-LIABILITIES-AND-EQUITY> 1,893,341
<INTEREST-LOAN> 29,988
<INTEREST-INVEST> 6,081
<INTEREST-OTHER> 93
<INTEREST-TOTAL> 36,162
<INTEREST-DEPOSIT> 13,035
<INTEREST-EXPENSE> 14,495
<INTEREST-INCOME-NET> 21,667
<LOAN-LOSSES> 393
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 15,661
<INCOME-PRETAX> 10,486
<INCOME-PRE-EXTRAORDINARY> 10,486
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,369
<EPS-PRIMARY> $ .60
<EPS-DILUTED> $ .60
<YIELD-ACTUAL> 5.23
<LOANS-NON> 3,457
<LOANS-PAST> 700
<LOANS-TROUBLED> 1,173
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,609
<CHARGE-OFFS> 367
<RECOVERIES> 269
<ALLOWANCE-CLOSE> 18,904
<ALLOWANCE-DOMESTIC> 18,904
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
